A few questions about a few thousand new auto-rickshaws in Delhi: Simon Harding

On Friday, Supreme Court judges KS Radhakrishnan and CK Prasad gave the go-ahead for 45,000 new auto rickshaw permits to be issued in Delhi. The move has the potential to drastically improve the city’s auto-rickshaw service for passengers and drivers alike, but many unanswered questions about distribution, implementation and numbers remain.

There are currently around 55,000 auto-rickshaws in the capital. The number of autos has not grown since the Supreme Court stopped the issuing of new auto permits in 1997 due to concern about the pollution emitted from the old dirty two-stroke petrol engines (now replaced with CNG).

The number has not remained frozen. Evidence suggests that it has actually fallen since 1997 because around 20,000 autos were lost during the CNG switchover as many drivers had their permits cancelled as they were too slow to convert their autos to the new fuel or simply could not afford the conversion. The fall in numbers contrasts with the growing demand for autos from Delhi’s population, which grew 21.6% in the period 2001-2011.

With no new permits available, aspiring owner-drivers must currently buy a permit from a financier on the black market for anything up to Rs.6.5 lakhs. In the absence of bank credit, most have to take high interest loans from the financier. Faced with huge monthly repayments these drivers then overcharge in order to repay the financier, buy CNG, handle the police and feed their families.

Renter drivers are in a similar predicament. They overcharge due to high rents which are pushed up by the limited number of autos available for rent and the large number of willing drivers. Increases in the meter rate simply result in higher rents and higher permit costs on the black market. The permit cap has created a sector in which financiers and contractors make big money at the expense of drivers and, ultimately, the public who are overcharged as a consequence.

Issuing new permits has the potential to change all this. The black market permit price dropped from Rs.6.5 lakhs to Rs.2.5 lakhs immediately upon the Supreme Court’s announcement. A drop that worried the financiers. If a large number of permits are freely available from the Transport Department, then the aspiring owner-driver will simply have to pay around Rs.1.4 lakh for a new Bajaj auto (even less for a second hand model) and a few hundred in administration fees for a new permit. Freed from huge monthly repayments, the need to overcharge passengers will lessen, although access to credit is a persistent problem for drivers.

With more autos on the roads, the number available for rent will rise, bringing down the daily rental cost and with it the pressure on renter-drivers to overcharge.

However, there are questions:
Who will get the permits?
How will they be introduced?
What documentation will the Transport Department demand?
Why 1 lakh?

In 2002, 5000 new permits were issued by the Transport Department on the orders of the Supreme Court. The idea was to grant them to poor drivers on a one-man one-permit basis. SC, OBC and open reservations were made. These permits were non-sellable. However, several years later, the Transport Department’s own records revealed that several wealthy individuals owned up to six of these new permits meant for the poor. Poor slum dwellers obtained the permits and handed them over to financiers for a small fee. The change of ownership was then happily registered by the Transport Department. Will this sort of thing be allowed to happen again?

The Transport Department is considering introducing the new permits in tranches. Their motivations for this are unclear. Is it to give the city’s CNG infrastructure time to expand to cope with thousands of new autos? Indeed, many new CNG stations must be built. Or is it so that the new permits can more easily be channelled to wealthy financiers and contractors as happened in 2002?

The Transport Department requires that drivers submit a long and exhausting list of documents in order to get the permissions necessary to ply an auto. Many drivers are migrants who do not have their old school certificates, a Delhi driving licence and a Delhi proof of address. This means the process is long, difficult, bribe-ridden and often arbitrary, changing upon the whims of officials. Very little is in writing and virtually nothing is publicly available. Will the Transport Department demand an unreasonable number of documents in order to deny new permits to poor migrant drivers? Will they demand bribes?

Finally, how have the judges come to the figure of 1 lakh as the total number of autos to be allowed in Delhi? Why not just allow permits to be issued freely to whoever wants one? That would totally eliminate any black market for permits and ensure that whoever wants to ply an auto can do so without unreasonable expense. This way public demand could determine how many auto Delhi needs, rather than two Supreme Court judges.

Judges Radhakrishnan and Prasad have made a sound decision, which has the potential to improve life in Delhi for millions of people. They recognise that the auto is an important part of Delhi’s public transport infrastructure – a welcome admission given the Chief Minister’s comments last year.

In a city which is adding 1,000 private cars per day and very little new road space, small, comparatively green vehicles like the auto are crucial. Poor regulation and vested interests have for too long held back the auto’s contribution. However, the thrust of the ruling – better transport for the public and an improved livelihood for auto drivers – must not be de-railed by vested interests and their allies in the Transport Department.

So here’s a live demonstration of the wonderful Nehruvian inspired License Permit Quota Raj alive and well today, thriving on engineered scarcity, which can be got around by bribing the right people. The sheep following Hazare and expecting him to magically get rid of corruption will never understand this.
Get rid of these stifling regulations. Socialism is a discredited philosophy worldwide, meant only for a group of enlightened altruists who will set aside their self interest. In reality that never happens.
The government should restrict itself to law enforcement, defence and fund individuals directly so they can obtain healthcare/rations/education from whoever is available to supply them.

Simon, thank you for your post and for following this issue so persistently. In my conversations with autowallahs in Delhi last few days, they all seem cautiously optimistic about this development, just like you put it. However, I was trying to find the order itself passed by the Supreme Court, but was unable to. Can you please post a link to the order itself.

Why not just allow permits to be issued freely to whoever wants one? That would totally eliminate any black market for permits and ensure that whoever wants to ply an auto can do so without unreasonable expense.

You cannot do that because there is what economists call “externality.” In other words, an autorickshaw has impact on parties other than the driver and his/her passenger. You have pollution (it is less as compared to petrol or diesel but still there). You have noise pollution. You have congestion of roads and so on. All these have to be factored in a decision of how many autorickshaws should be allowed to ply.

Different cities seem to have different ways of controlling the number of taxis/autorickshaws. One way of controlling the number taxis/autorickshaw is to fix the number a priori, as Delhi has done. London, on the other hand, seems to do it indirectly. Theoretically, anyone can get a license in London but to get one, he/she has to pass a very tough test called, very simply, The Knowledge. According to this website:

London’s black cab drivers have a reputation for knowing their stuff when it comes to getting their customers to the correct location by the shortest route. This is no bluff, to become a London taxi driver you have to pass a test known as The Knowledge and it normally takes between 2.5-3.5 years for people to complete the course.

Note that the time taken to complete the course is about the same as involved in completing a regular university Bachelor’s degree!

We can argue whether, in the Indian context, it is more “fair” to fix the number a priori or control it indirectly through a very tough exam. But either way, I don’t think one can simply allow every eligible driver to get it. I would be extremely sympathetic to your argument if it involved cycle rickshaw drivers because most of the third-party “spillover” effects that I talked about are absent. Indeed, Madhu Kishwar has made this argument in a series of articles.

Now, of course, one can ask why not restrict the number of private cars? And yes, there is a case for doing so by imposing appropriate taxes. Many European countries do this indirectly by taxing petrol. Australia has now started imposing a “carbon tax.” London imposes a “congestion tax” on vehicles entering central London. And so on and so forth. A lot remains to be done in this regard in India.

A final note: I am not sure of the wisdom of the Supreme court getting involved in the nitty-gritty of policy making. I do not at all appreciate two supreme court justices (no matter how wise) deciding the number of autorickshaw licenses in Delhi.

Free permits would significantly increase the numbers of autos on the streets. But Delhi needs those autos. The city had 80,000+ in 1997 for a smaller population. It also currently has fewer than other major cities (such as Chennai). The geography of Delhi also plays a role: it is sprawling and multi-centred, which creates very diffuse travel patterns amongst residents which defy the Metro and the bus routes (in contrast to the morer linear “up-down” journeys made in Mumbai). So, we all seem to agree that Delhi needs some more autos.

Issuing free permits would destroy the black market in permits and with it the cosy relationship between the financiers and the Transport Department. The permit price would drop from multiple lakhs to a nominal fee.

Would it lead to an excessive number of new autos on the streets? I don’t think so. What I am proposing is for the free issuance of auto permits to whoever wants one. The budding driver still has to find Rs.1.4 lakhs for a machine. That is still a quite substantial barrier to entry into the sector and it will go some way to slow the flow of new entrants and the externalities they may cause.

How many autos does Delhi need? I don’t know. The Supreme Court doesn’t know either. 1 lakh seems arbitrary – the reasoning behind the number has not been made public. I think the best way to find out is to let the market decide – just as currently happens with private vehicles.

I agree that far more should be done to discourage the growth of private vehicles in Delhi (private vehicle numbers have increased 51 times from 1973-2003 – Delhi now has 7% of India’s private vehicles and 1.4% of the population). Private cars have larger externalities than autos, in terms of pollution and road space and Delhi is currently adding them at a far faster rate than autos. I think the burden of regulation should switch. It should fall on the private car owner and not the auto sector.

dear sir,
i wish to know that can’t an ordinary driver who have available the require documents purcase auto rickshaw directly from the company.
if yes, so , what are the proces to purchase from company.
because many brockers have registered many auto rickshaw only for earning huge profit. the agents are selling at high price min-2.60lakh.
i want to ask that why are the company issued more than one auto rickshaw for one person. Is it not a corruption? Tell me!

Indeed i am looking for the information about the auto rickshaw and what is the permit cost and the procedure for making the permit in Delhi for Auto Rickshaw. Any person who know real fact are requested to give the answer. Vinod

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